Denmark is Better At Realizing the American Dream Than America

Bernie Sanders has discovered utopia: Denmark. The small country has managed to provide universal health care, extensive parental leave, and generous vacation and unemployment benefits. The result: happiness, equality, and social mobility.

This strikes at the core of the American fallacy: the idea that decadent wealth and abject poverty provide an incentive for the poor to pull themselves up by their own bootstraps. It turns out that the opposite is true. Last week, I wrote about the demise of the American dream of meritocracy and equality. Today, I’ll expound on that post by looking at the “Nordic Model.”

Denmark’s success has been noted before: The Economist recently hailed the Nordic model as an expansive and thick social safety net beside vibrant capitalism as the next “supermodel.” The evidence is strong: the four Nordic countries rank at the top for entrepreneurship, education, happiness, health indicators, equality and social mobility.

What are they doing right? First off, they aren’t socialist utopias; the countries have  actually embraced capitalistic reforms: charterish schools, low budget deficits, low corporate income taxes and sweeping pension reforms. 

So what’s the big deal? How do they find the perfect balance? Three factors explain most of the success of the Nordic model: universal health care, public financing and education.

America has always praised its entrepreneurs; it does little however, to protect those who fail. Taking risks in America could mean risking your health insurance, since many Americans get insurance from their job. Poor families have little access to preventative care, and therefore are more susceptible to diseases like hypertension and diabetes where early discovery is key.

Lack of health insurance makes it harder to climb up the economic ladder. Anne Case and Christina Paxson find that poor children receive inadequate health care which dampens their upward mobility. Recent research by three Harvard researchers found that the percentage of bankruptcies caused by medical problems increased by 50% between 2001 and 2007. Inadequate health care systems increase inequality and makes it harder for poor Americans to share in the wealth and take advantage of opportunity.

Secondly, in America public policy is essentially defined by the wealthiest Americans. Two political scientists, Martin Gilens and Larry Bartels have both found (independently) that the the U.S. political system is entirely unresponsive to the preferences of poor Americans. In 2005, Larry Bartels examined how responsive Senators were in the 101st, 102nd and 103rd congress to the preferences of various constituents. His findings are summarized in the chart below.

In America, wealthy individuals and corporations define the political dialogue, labor unions have been crushed and voters, sensing the inequality, have become disenchanted.

In contrast, the Nordic countries all have a system of public financing and a vibrant labor movement. Consequently, politicians are responsive and voters actually care enough to show up at the ballots (it’s worth noting the number of female Prime Ministers in the Nordic countries: Helle Thorning-Schmidt in Denmark, Tarja Kaarina Halonen in Finland and Jóhanna Sigurðardóttir of Iceland — also the first lesbian head of state in history).

The education system in Nordic countries is also preferable to the American system. Parents are granted gracious leave to be with their children in the earliest years of development (in America parental leave is reserved for the upper middle class). Sweden is experimenting with a voucher option that allows children from poorer backgrounds to attend the same schools as wealthy students. In America we have a two-tiered education system: great schools for the rich, awful, underfunded schools for the poor. College is free and in many countries, so is graduate school. Rather than seeing education as a service, in the Nordic countries it is seen as an investment. Graduates leave college debt-free and can pursue their dreams without the fear of paying off debts.

The results are staggering. Nordic countries (well, all developed countries) spend far less on health care and yet insure all of their citizens. It’s certainly a crude measure, but I’ve charted health care spending and life expectancy for OECD health care systems. The Nordic countries vastly outperform the U.S., which pays exorbitant costs for health care with little to show. This is actually slightly untrue; in America there are two health care systems: one, which works incredibly well, but serves only about 10% of the population and the other, which delivers little but bureaucracy and unnecessary procedures.

And they’ve succeeded where America has failed: upward mobility. The chart below shows what’s called Intergenerational Earnings Elasticity. It’s a measure of how much social mobility exists within a society. The higher the number, the more a child's earnings correlate with their father's. A lower number indicates more social mobility. We see the Nordic countries have the highest rate of upward mobility.

The Nordic model exemplifies a centrist attitude toward government. The government doesn’t just redistribute wealth, nor does it leave everything to markets. It opens opportunity for everyone — and they take it. Until Americans embrace the politics of opportunity — the idea that everyone should have access to good health care, a good education and a voice — the American dream will continue to remain more fable than fact.